RE CHINA NATIONAL AVIATION CO LTD

RE CHINA NATIONAL AVIATION CO LTD

The scheme was sanctioned and the reduction confirmed because all statutory and procedural requirements under the Companies Ordinance were complied with: the class was properly constituted and fairly represented, the explanatory statement provided sufficient information, the requisite majority approved the scheme, independent advisors recommended it, undertakings were given by affected parties, and the court was satisfied creditors would not be prejudiced; accordingly the scheme and attendant reduction have a proper purpose and effect and an order in terms of the draft was made.

Citation
RE CHINA NATIONAL AVIATION CO LTD
Parties
Petitioner: China National Aviation Company Limited; Majority Shareholder / Proposed Transferee: Air China Limited; Minority Shareholder / Undertaking Party: Merrill Lynch, Pierce, Fenner & Smith Incorporated; Minority Shareholder / Undertaking Party: Merrill Lynch International; Option Grantees / Interested Parties: Four grantees of the share option scheme
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
25 January 2007
Case Number
HCMP2290/2006
Procedural Posture
Companies Ordinance Scheme of Arrangement and Reduction of Capital / Sanction and Confirmation Hearing; Judgment (reasons Delivered)
Outcome
Scheme of arrangement sanctioned and reduction of capital confirmed; order in terms of the draft submitted made by the Court
Legal Topics
Scheme of Arrangement, Reduction of Capital, Shareholder Meetings and Voting, Creditor Protection, Takeovers Code Compliance
Source Language
EN
Company Law Corporate Restructuring Securities Regulation Scheme of Arrangement Reduction of Capital Shareholder Meetings and Voting Creditor Protection Takeovers Code Compliance

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Parties

China National Aviation Company Limited

Petitioner

Air China Limited

Majority Shareholder / Proposed Transferee

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Minority Shareholder / Undertaking Party

Merrill Lynch International

Minority Shareholder / Undertaking Party

Four grantees of the share option scheme

Option Grantees / Interested Parties

Procedural Posture

Companies Ordinance Scheme of Arrangement and Reduction of Capital / Sanction and Confirmation Hearing; Judgment (reasons Delivered)

Legal Issues

  1. 1 Whether the proposed scheme of arrangement under section 166 should be sanctioned by the court
  2. 2 Whether the proposed reduction of share capital under section 58 should be confirmed
  3. 3 Whether the class of members was properly constituted and fairly represented at the court meeting

Ratio Decidendi

The scheme was sanctioned and the reduction confirmed because all statutory and procedural requirements under the Companies Ordinance were complied with: the class was properly constituted and fairly represented, the explanatory statement provided sufficient information, the requisite majority approved the scheme, independent advisors recommended it, undertakings were given by affected parties, and the court was satisfied creditors would not be prejudiced; accordingly the scheme and attendant reduction have a proper purpose and effect and an order in terms of the draft was made.

Court Disposition

Scheme of arrangement sanctioned and reduction of capital confirmed; order in terms of the draft submitted made by the Court

Orders

  • Scheme of arrangement under section 166 of the Companies Ordinance sanctioned as drafted
  • Proposed reduction of share capital under section 58 of the Companies Ordinance confirmed